Ladies and gentlemen, good day, welcome to Sunteck Realty's Earnings Conference Call for Q4 FY 2020 and Q1 FY 2021. We have with us today Mr. Kamal Khetan, the Chairman and Managing Director of the company, along with the senior management team of Sunteck, comprising of Mr. Manoj Agarwal, Chief Financial Officer, Mr. Prashant Chaubey, Head of Corporate Finance, and Mr. Ronak Rathi, AVP, Investor Relations. Please note, this call will be for 60 minutes, and for the duration of this conference call, all participant lines will be in the listen-only mode. The conference is being recorded, and the transcript for the same may be put up on the website of the company. After the management's discussion, there will be an opportunity for you to ask questions. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone.
Before I hand the conference over to the management, I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements, including those related to general business statements, plans, and strategies of the company, its future financial condition, and growth prospects. These forward-looking statements are now based on the expectations and projections and may involve a number of risks, uncertainties, and other factors that could cause actual results, opportunities, and growth potential to differ materially from those suggested by such statements. I would now like to hand the conference over to Mr. Khetan, Chairman and Managing Director of the company. Thank you, over to you, sir.
Good evening, everybody, and welcome to the earnings call for the fourth quarter of the financial year 2020, as well as the first quarter of the financial year 2021. Thank you for joining us. Before I share a few updates, I sincerely hope all of you are safe and fine. The ongoing COVID-19 pandemic for the last 4-5 months has significantly impacted the economy across industries. The quarter gone by has been the most unprecedented and challenging one so far. On the macro side, we are seeing few things. Uncertainty in the business and employment could lead to near headwinds. On the flip side, the interest rates for housing are extremely low, and affordability is attractive. The importance of having a nice home in a work-from-home environment is positive. We are observing a major shift from wanting to buy under-construction to wanting to buy ready or near-ready inventory.
More by luck rather than design, a majority of our inventory is now ready or near-ready. We have been positively surprised by the kind of pre-sales we have been able to do, and most of it is driven by either finished or close to finished inventory. Such as in our projects like Sunteck City Avenue 1, Signia High at Borivali, and Signia Waterfront in Airoli. We have also seen a significant momentum at Sunteck World, Naigaon, phase I, that Sunteck WestWorld, which is near ready and affordable, hence most resilient. During the lockdown, we shifted gears to launch a digital platform, Sunteck Air, that accelerated the sales momentum despite the pandemic. During the complete lockdown in MMR, we were able to book healthy pre-sales. All our under-construction sites now have resumed, and we are on track to returning to pre-lockdown activity levels by next month.
It is opportune time to offer ready-to-move in inventory given the current demand trends. It is important that we continue to focus on our construction progress, which in turn will lead to stronger revenue recognition as well as generate steady cash flow in coming quarters. GST, demonetization, RERA, NBFC crisis, and now COVID-19 is only going to increase the pace of consolidation in the real estate industry. Developers with weak balance sheets have multiple challenges, lack of liquidity to complete the projects, and non-availability of fresh capital. Lenders are not willing to offer home loans to buyers of unorganized developers, and there is a tremendous distress on the street. Our brand recall, quality, execution track record, and balance sheet strength positions us to be one of the biggest beneficiaries and increase our market share.
We intend to capitalize on the opportunity at hand, setting the stage for further sustainable growth and attractive ROE. Our recent acquisition of Vasai West is a step in this direction. Similar to our strategy to enter Bandra Kurla Complex, BKC, and ODC at Goregaon West and the Naigaon market. Vasai will evolve into our fourth growth engine as it offers a big demand potential in an untapped micro market. With a focus on middle income group, we intend to offer well-designed apartment, unobstructed sea view, catering to emerging customer need of residential premises that not only offer a luxurious lifestyle, but also ensure a comfortable work from home environment. On that note, I would now like to handover the call to our CFO, Mr. Manoj Agarwal, who will take you through the operational and financial numbers for both the quarters.
As always, I'll be happy to answer any of your questions that you may have during the conference call. Over to you, Manoj.
Thank you, sir. Good evening, everyone, and thank you once again for joining us today. I would like to run you through the financial and business performance number for fourth quarter of financial year 2020, full year financial year 2020, and Q1 of financial year 2020-2021. I'll begin with the operational performance numbers. We recorded pre-sales of INR 608 crore in quarter 4 of financial 2020, which is 110% increase year-on-year as compared to INR 289 crores in quarter 4 of financial 2019. Our pre-sales in financial 2020 stood at INR 1,221 crore, which is a 2% increase year-on-year as compared to INR 102 crores last year. In terms of distribution mix of quarterly pre-sales of INR 608 crore, Naigaon pre-sales stood at INR 680 crores, while ODC contributed INR 6 crore.
In BKC, one unit was been sold for INR 81 crore and balance INR 3.2 crores spread across other projects. In Q4, we sold 1,772 units in Naigaon, three units in ODC, and one in Signia Waterfront. We achieved collection of INR 715 crore in financial year against INR 661 crore, which is 8% growth as compared to FY 2019, and INR 175 crore for Q4 of FY 2020 against INR 160 crore in previous year and INR 207 crore in previous quarter last year. In terms of financial highlights, we reported consolidated revenue of INR 608 crores in FY 2020 against INR 857 crore in last year. Our consolidated revenue in Q4 of FY 2020 was at INR 92 crore against INR 198 crore of Q3 FY 2020 and INR 270 crore of Q4 of FY 2019.
On the EBITDA front, the consolidated EBITDA of FY 2020 is INR 163 crore against INR 378 crore in the last financial year. We recorded consolidated EBITDA for Q4 at INR 9.2 crore against INR [50.2] crore of Q3 and INR [88.8] crore of Q4 of financial year 2019. Our consolidated EBITDA margin in financial year 2020 is at 28% compared to 44% last year because of change in revenue mix. With respect to profit after tax, we reported INR 1 crore in Q4 against INR 33.6 crore in the previous quarter.
Ladies and gentlemen, the line for the management has got disconnected. Please stay connected while we reconnect the management. Ladies and gentlemen, thank you for patiently holding. We now have the lines with the management reconnected. Over to you, sir.
I'm extremely sorry about this. We actually had some logistics problem. We are back live. Really sincerely sorry about this. Hang on. I'll start from the operation number. We recorded pre-sales of INR 608 crore in Q1 of FY 2020, which is a 110% increase year-on-year as compared to INR 289 crore in Q4 of FY 2019. Our pre-sales in FY 2020 stood at INR 1,221 crore, which is a 2% increase year-on-year as compared to INR 1,202 crore last year. In terms of distribution mix of quarterly pre-sales of INR 608 crore, Naigaon pre-sales stood at INR 680 crore, while ODC contributed INR 6 crore. BKC, Bandra-Kurla Complex, was INR 81 crore, balance INR 3.2 crore spread across other projects.
In Q4, we sold 1,772 units in Naigaon, three units in ODC, and one in Signia Waterfront. We achieved collection of INR 715 crore in FY against FY 2020, against INR 661 crore, which is a 8% growth as compared to FY 2019, and INR 175 crore for Q4 of FY 2020 against INR 166 crore in previous quarter and INR 207 crore in previous quarter last year. In terms of financial highlights, we reported consolidated revenue of INR 608 crore in FY 2020 versus INR 857 crore last year. Our consolidated revenue in Q4 of FY 2020 was at INR 92 crore against INR 198 crore of Q3 FY 2020 and INR 270 crore of Q4 FY 2019.
On the EBITDA front, the consolidated EBITDA for FY 2020 is INR 163 crore as against INR 378 crore in the last financial year. We recorded consolidated EBITDA for Q4 at INR 9.2 crore as against INR 50.2 crore of Q3 and INR 88.8 crore of Q4 of FY 2019. Our consolidated EBITDA margin in FY 2020 is at 28% compared to 44% last year because of change in revenue mix. With respect to profit after tax, we recorded INR 1 crore in Q4 against INR 33.6 crore in the previous quarter. We have reported PAT of INR 101 crore in FY 2020 as against INR 241 crore in last year. Our consolidated PAT margin for FY 2020 is 17% compared to 28% last year.
I also want to touch upon the cash flow statement for FY 2020. Our cash flow generated from operation before tax and after investment in business development for the year stood at INR 7.3 crore, and after tax negative INR 34.6 crore. Now, I would also like to run you through the financial and business performance number for the first quarter of financial year 2021. I'll begin with the operational performance numbers first. Pre-sales in the first quarter stood at INR 101 crore. Compared to INR 185 crore last year, same quarter. In terms of distribution mix of quarterly sales of INR 101 crore, it's 40% of ODC, 48% in Naigaon, and the balance in other projects. Unit-wise breakup is 21 units in ODC, at 123 units in Naigaon, and seven units in Signia Waterfront.
We also achieved collection of INR 65 crore in first quarter compared to INR 189 crore in Q1 financial year 2020. In terms of financial highlights, we reported consolidated revenue of INR 61 crore in Q1 of financial year 2021. This is decrease of 34% quarter-over-quarter against INR 92 crore of Q4 FY 2020, and decrease of 66% year-over-year is against INR 178 crore of Q1 FY 2020. On the EBITDA front, the consolidated EBITDA for Q1 at INR 10 crore is against INR 9 crore of Q4 financial year 2020. Our consolidated EBITDA margin for the first quarter of FY 2021 is at 17%, compared to 10% last year. With respect to profit after tax, we recorded INR 3 crore in Q1 against INR 1 crore in the previous quarter. We can now open the forum for questions from the participants. Thank you very much.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question, may please press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is on the line of Aditya Chasapadase from ICICI Securities. Please go ahead.
Good evening, everyone. Thanks for the opportunity. The first question on the BKC cancellations, could you just explain this, for how many units has it been, and what is the accounting impact? Do we expect any more cancellations in the first or second quarter of this year, depending on what visibility you have?
One second.
Aditya, are we audible?
Yeah. Can hear you.
Aditya, one second. We are trying to switch on to the other phone because of this logistic problem which happened. Let us just wait for a second.
Sure. Yeah.
Yeah. Okay.
Aditya, can you hear me?
Yeah. Can hear you.
Okay. Aditya, Prashant, it is right. We have canceled one unit in Signature Island, which is of the value of INR 81 crores, and that is what has been written down in the fourth quarter of financial year 2020.
Which was sold in Q2.
Which was sold in Q2.
Okay. Just on that follow-up, what is there any further cancellations? Is this just one off you are seeing?
Right now it's one off. Aditya, obviously, this was just pre-COVID. The deal was in Q2, and the deal was going through. This is one off, I can say. Obviously, we don't expect any more to happen.
Okay. Sure. Second question is, now after COVID, what is the plan now for our ODC commercial, the 3 million square feet? How do you look at the project mix and now timelines for the project? Yeah. Thank you.
Aditya, we want to be obviously cautious after this COVID-19. It is, again, by luck, I would say. Due to the approvals, delay in getting the approvals. In fact, on the hindsight now, it has turned out to be lucky for us that we didn't start the project. We would definitely want to see the market once this COVID-19 thing gets over, for three to six months. If we see the demand continues to be there in the commercial segment, we will go ahead and do commercial out there. If we don't see the demand, we have a plan too. That is definitely we can start looking at residential in that sector. The Avenue 5, which we call, where we were going to do commercial. We can partly start with residential instead of commercial.
Okay.
If we feel that commercial demand goes down completely after post-COVID. We want to wait and watch for next 3-6 months.
Okay. Fine, sir. That's helpful. I'll come back if required with more questions.
Thanks.
Thank you. The next question is on the line of Hitesh Gandhi from Discovery Capital. Please go ahead.
Hi. Given we are actually located in MMR, which was pretty much under hardcore lockdown in Q1, can you just explain to us how we were able to do the pre-sales of INR 100 crores plus and also the trajectory we are seeing between April, May, June, and also as we go into July, August, how the pre-sales is looking and how the market's looking?
Hi, Hitesh. Definitely when there was a complete lockdown in MMR, in spite of that, I think one of the biggest thing which helped us. That we started immediately the online platform after the lockdown within 15 days. We tried to put a online platform, and we marketed it as Sunteck Air, and we put it up. We felt that there should be some demand. We didn't want it to keep our sales team idle. In fact, we were also really pleasantly surprised. We thought that, okay, we'll at least keep our sales team busy and try to do some sales than rather doing nothing. In fact, we were pleasantly surprised after seeing the demand.
As I spoke in my speech, before in my commentary, that the most of the demand we could see was coming for the people who have like in lockdown, they feel the people who are on the leave and license or they don't have home, now the work from home has become maybe the people going forward, we'll see lot more and more work from home happening, many companies. In fact, I think that at least 20%-25% of the staff, some of the departments can work from home. I think this has made people who were fence-sitter or were not buying home and waiting for the correction, because pre-COVID also the market was not so good for real estate. Post-COVID, people felt that obviously now people feel this is the bottom, now it's the right time to buy a house, and they feel.
We see a good demand, and that's why we could do good sales. Not only that, if you look at our current quarter, I can share that till July, we have done sales. Looking at the current sales, I won't be hesitant in saying that I'm pretty confident this Q2 might surpass the corresponding Q2 of the last year pre-sales. We are seeing that kind of demand, especially in ready-to-move-in product or near ready-to-move-in products.
Okay, fine. Interesting.
Absolutely.
The other question was, if you could just highlight some of the actually economics of your recent acquisition in Vasai. We thought, I mean, the press release out of potential INR 5,000 crores of revenue. If you could just give us a broad view of how much of that will be shared, how much of that will be our cost, and in turn, effectively, how you think about this project as a whole in terms of equity IRRs and also in terms of absolute profits.
Hitesh, I will give you some strategy. As you see that we have always tried to go when we take a big project, we are very particular about the location. We do lot of research before we get into any location. If historically you see, we have gone to BKC and then ODC and then the Naigaon. We have explored such new locations, and where we saw there is a untapped demand which is there and which can be tapped even in any market that outperforms. While doing this, we obviously see this Vasai market, which is one of the posh location of the Vasai, and which has a very beautiful scenic view from this property, a sea view, and we definitely wanted to tap this. This is, again, an asset-light model.
I think we got, in fact, a better deal than what we did for Naigaon because of the current market conditions. Almost like 25% of that top line. This is a micro market which is more expensive than Naigaon. Still, in Naigaon, like we give close to 25% of that top line in Naigaon. If this market, in spite of being expensive than the Naigaon market, we will still continue to give almost similar 25% of that top line to the landlords. In looking at IRR numbers and other things, I think, Ronak, can you explain in detail?
Sure. In terms of top line, as we mentioned in our press release as well, we are looking at close to INR 5,000 crores. Our share will be closer to INR 3,750 crores out of that if you do a simple math of 75%. This, in terms of structure, is very similar to our Naigaon deals. We are only responsible for execution, sales, and marketing. All land-related premiums as well as approvals are to the account of the landowners. Our limited cost will be only to the tune of INR 1,250 crores, which is for execution. We are looking to realize a surplus of about INR 2,500 crores on a project life cycle of about 5- 7 years. In terms of margins, we expect this to be close to between 25%-30%, typically in range for this pricing.
I think our share of the surplus from actually in Vasai after cost could be INR 2,500 crores.
Yes, that's right.
Over how many years you think [crosstalk]
We are looking at a project life cycle of about 5-7 years.
Got it. Just a last question is that, are there other acquisitions actually like this which we are considering, or we will go slowly at a bite size with actually piece by piece?
Hitesh, Kamal here once again. Definitely, because we want to be very aggressive, at the same time, very cautious. You can understand that's why we are very clear we are doing asset light. We won't stress our balance sheet, but I can tell you, we are looking at similar kinds of projects without putting balance sheet under pressure. We will continue to do some aggressive, cautious acquisitions.
Got it. Understood. Thanks, and all the best.
Thank you, Hitesh.
Thank you. The next question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, thank you so much for the opportunity. Just on this Vasai thing, how many million square feet will that add to your portfolio?
Hi, Puneet.
Okay.
It will add almost 4.5 million sq ft.
Okay. Basically, you're looking to sell half a million sq ft every year in that locality. More than half.
Typically-
Yeah.
At Naigaon, typically, we sell close to a million square feet every time we launch, which is in a year, 12-15 months.
Yeah.
We are looking half of it to be sold, 50% of that kind of volumes for Vasai.
Right. Great. This is very interesting. You guys are going to places like Naigaon, Vasai, and obviously doing very well. The deal looks good, and your performance on Naigaon also is quite impressive. What is it that you are doing differently versus some of the other guys who would also be seeking to enter these markets? What is the competitive advantage that you have here?
I think, Puneet, definitely today, everything is your brand and the performance and the financial strength.
Yeah.
I think these three put together, and also the execution track record. If you maintain brand, that means everything comes into under that. Obviously, you have to be financially disciplined, the strong balance sheet. One more thing, people must have seen our track record. We have not rushed desperately gone and did some acquisition. Whenever we did acquisition, we have done a lot of research on that location before entering any location. Historically, even if you see, since Sunteck has born, since 2006, 2007, always whenever we have gone big on any location, we have taken that territory into a different zone, that particular micro market.
Yeah. Okay. If you can give some color on what is the inquiry momentum in the current month, July, for your ODC portfolio. I thought it was a very interesting portfolio pre-COVID. Do you think that portfolio might become a disadvantage given that people might ask for slightly bigger homes?
No, I don't think so, because, in fact, the most of the inventory what we sold right now, second to Naigaon is ODC, which is all the three phases, phase I, phase II, and phase III. Obviously, phase III, which is the 4th Avenue, the inventory sold post-COVID-19 is negligible because it is just under construction, and it's just started the construction, and the project will be delivered next after two and a half to three years. Whereas the Avenue 1 and Avenue 2, first phase and second phase, which is almost completed and near completion, there we have seen a good demand, an excellent demand, and we continue to see that robust demand. That's why we are putting all our strength, I would say, to do execution, and keep the execution at the fastest speed as possible.
Puneet, Ronak here.
Yeah.
Just one point, because you spoke about larger homes.
Yeah.
In fact, in the last quarter or two, we have also seen a lot more inquiries in Avenue 1, because relatively there the apartments are slightly bigger. That also being nearing completion becomes a very attractive proposition for the customers as well.
Also larger homes and affordability. That is also a key thing. If you give a larger home in Borivali, which is worth like INR 5 crore, INR 6 crore, obviously.
Yeah.
How much affordability you can look at, and how many apartments you can sell. Definitely we are seeing in July a great demand again. What we could not sell in last two years, that kind of momentum just in July in Signia High. We are seeing that kind of demand which is completed per se, and as rightly what you speak, large homes. These are large homes. Not too much of the inventory, like not 200, 500 apartments. Valiance apartments are just 30, 40. I see that market in every micro market for that kind of a product, but not more than 40, 50. That is a ticket size of INR 5 crore-INR 6 crore in Borivali. That ticket size, you can't sell 400 or 500 apartments, but you can definitely sell 30, 40 apartments.
Fortunately, by luck, we only have that 30, 40 apartments, and we are so confident that what we didn't sell in last two years, we may end up selling in this month or maybe next month. That's how the demand which we are seeing. It's lot of exciting times that we can share.
Yeah. What is also interesting is that for the ODC side, you actually did higher number of sales in Q1 versus Q4.
Correct.
Is there something to read into it, or would you comment what was different in Q1?
Post-COVID, that's what I'm trying to say. We have been selling more in post-COVID, the ready inventories-
Okay
-than pre-COVID. That is what we are seeing the difference.
Okay. In this INR 40 crore, you would say bulk of it would be Avenue 1 and Avenue 2?
In Sunteck City, 90% is in Avenue 1 and Avenue 2 post-COVID.
Okay. Interesting. That's very helpful. Thank you so much.
Thank you.
Thank you. We'll go on to the next question that is from the line of Prem Khurana from Anand Rathi. Please go ahead.
Thanks for taking my question, sir. Two questions from my side. One was, eventually, when I look at the acquisitions that is done in the resale part and we've done three that has been announced officially. One was Andheri West, and then we had Naigaon, and then we have this Vasai. All these three do seem to be in kind of extended suburbs. Is it by design that you've been able to manage these or you are working towards kind of adding more on extended suburbs because you get to have larger layouts wherein you have option to be able to design your product as per your discretion. Whereas when you look at some of these suburbs, you tend to have some restrictions in terms of FSI usage as well as in terms of the kind of size that you'll be able to get.
By design, definitely, we would not like to enter certain micro markets. I would not like to name, but there many of the developers are there, and they are on their fingers, and they're not able to sell even a single apartment. There we see there is a demand which is there, and we do our research. That's what I said. Naigaon, there was no one who tapped Naigaon or no one tapped BKC as a residential, or there was no demand in ODC. We saw that there is a demand which is there, which is untapped. Similarly, in that micro market of Vasai, we see a huge potential of demand which is untapped by any organized player. We like to go in those micro markets.
We don't like to go where everybody else is going, we also go by default in that micro market. We have been very selective, and I can say fortunately, we have been lucky and where what we want, with the hard work, we get it finally. Otherwise, it is not necessary then you do all the hard work, then you get it. God has been kind, and I would say we have been also lucky in getting that.
Just to understand it better, sir, when you evaluate or rather when you look at growth opportunities, do you tend to go with the mind that I want to have this much area in let's say before Borivali and then these many million square feet after Borivali? We have no such restriction then we are free and if it is as it comes with our strategy, we are open to take up more on beyond Borivali projects.
Yeah. Definitely. We are open to take where we feel there is enough demand. We'll continue to do aggressive but definitely cautious in current times, acquisition on a asset-light mode. We see there is a huge potential and there is lot of distress in the market. At the same time, we want to be aggressive, but again, very cautious.
Just a last from my end. On Andheri West launch, any timelines in mind now? Especially given in the backdrop of COVID, as you rightly said, the demand seems to be much better for the near complete or ready to move inventory. Would that make you kind of push that launch to a date which is farther in the future now? As in, if you were trying to plan to launch it this year, could it be pushed to next year or we are going ahead with the launch this year only?
We will definitely continue to keep our launches on. We'll not like to delay. Maybe, we may see not that much of a demand for under construction, but it's not that there is no demand for under construction. For a good developer, organized developer, there is enough demand for even under construction. If there is any demand which goes down, obviously in under construction, I think more than that, which will be compensated by selling ready inventory with the cash flow coming upfront. I think that is the key point which we should understand, which is the big benefit for the company, I think. I will be more keen in selling the ready inventory. That does not mean that I will not sell or not launch any new project, but we are anticipating.
Let us accept and understand that, suppose pre-COVID, we would sell, let's say 100 apartments. I wouldn't be surprised now in the same launch, maybe under construction, we may end up selling only 60% or 70% of it. It's 100 versus only 60%, or maybe 100 versus only 70%. I think more than that, it will be compensated that 30% loss or 40% loss will be compensated by selling the ready inventory which was not moving out for quite some time, and which was building up in our portfolio. In fact, that has come as a great advantage, I think. I think that answers your question.
Yeah, that answers my question. I have few more in [inaudible]. Thank you.
Thank you so much. Thank you.
Thank you. We'll move on to the next question that is from the line of Sagar Karkhanis from Motilal Oswal. Please go ahead.
Yeah. Hi, Kamal sir. How are you?
Hi. Hi, Sagar.
Yeah. Sir, first of all, congratulations on showing some fantastic pre-sales and collections in an otherwise really lackluster environment for the real estate industry. I just had some questions on our new project in Vasai. If you can just share what is our vision, in terms of what will be the ticket size over there and what kind of customer profile that we are looking at. I understand this location is very far away from the railway station. You must have thought of what kind of customers you will be looking at, and can you share some of your broad overview on this?
We are looking definitely, Sagar, at a mid-income group segment, which is the demand in that micro-market, what we studied. What we are selling in Naigaon is a ticket size which is INR 35 lakhs, one BHK to three BHK, which is INR 65-70 lakhs in Naigaon. Here, what we are looking at two BHK, which is INR 45-50 lakhs, going up to three BHK, which may go up to less than INR 1 crore, which is something between INR 75 lakh to INR 1 crore. I think that micro-market has enough potential for this. This may be slightly early conversation, but this will complement something like for a Andheri or Vile Parle area, or a Lokhandwala for a Andheri location. This will be something similar, a demand which will go in that micro-market of Vasai, something which we create a luxury in that micro-market.
There is a huge demand for that kind of a product there.
Sure. Given that we are seeing a good traction for ready-to-move-in apartments, and this is going to be a greenfield project, how do you see the sales velocity picking up for this project? We will be doing pre-sales for under construction, the construction we will be doing in-house for this?
We have across all our brand, in fact, if you see, we have construction in-house only. Whether it is our top-end, which is uber-luxury signature brand or a Signia brand or a Naigaon construction or the City construction, it is all in-house. This comes something between City and the World, I would say. This is something, a product which is slightly lesser expensive than the City, Goregaon product, and it is more expensive, slightly more expensive than the Naigaon. I think there is no reason why should we outsource the construction when we have enough good capability of constructing in-house. I don't see any reason why it should be construct through the third party.
Sagar, Ronak here. Just one more thing. From a customer perspective, large organized players will continue to be the preferred mode for buying when looking at new projects, right? Even though we'll be offering it as an under-construction project, I think somewhere the customer will also derive comfort from our balance sheet strength and our ability to deliver. We don't really foresee it to be a challenge, per se, from that perspective.
More than that, we have only considered half of the volume of Naigaon, that's why. We have already taken that thing into consideration, that whatever we have sold in the past, whatever we have sold in Naigaon, let's say almost a million square feet during the launch, versus which every year we will only sell in every launch half a million square feet. I think that we have already taken it quite conservatively.
Right. Thanks a lot. That's helpful. Like I said, in a dull environment, if we are showing such encouraging numbers, I'm really excited about what we can achieve when the market recovers. Best wishes, sir. Thank you.
Thank you, Sagar.
Thank you. We'll move on to the next question. That is on the line of Biplab Debbarma from Antique Stock Broking. Please go ahead.
Good evening, sir. Good evening, everyone. My first question is on the cash flow situation. Just trying to understand the cash flow situation. If we agree there is no incremental sales in FY 2021, how would cash flow situation would be? What is your total receivables, construction cost to be incurred, fixed cost, interest, and debt repayment in FY 2021? Just trying to understand the cash flow situation.
Good evening, Biplab. This is Prashant Desai.
Yes, sir.
First of all, I would like to mention that the situation of no sales doesn't arise because in the first quarter, we have already done INR 100 crores worth of sales, and that too in a lockdown environment. From that perspective, the question of no sales doesn't arise. That is the first point I want to clarify. Secondly, sir, on the debt front, I can tell you that our debt levels are one of the best in the industry. Our debt-equity ratios today stand at 0.26 net debt to equity ratio, and our total debt is around INR 750 crores, total net debt. Coming to the receivables. Our receivables from both completed, nearing completion projects is to the tune of INR 1,100 crores. Against that INR 1,100 crores, we have to incur only INR 300 crores of cost. Balance INR 700 crores is free cash flow for us.
It is completed receivables I'm talking about. From projects which we have launched in the last two quarters, we have a total receivables of close to INR 800 crores, against which we have to spend INR 650 crores. All in all, if you see, my total net cash flow from committed receivables will be close to INR 930 crores, and over and above this, I'm sitting on unsold inventory in these two brackets of close to INR 3,500 crores. Over the next 2-3 years, you will see this INR 4,500 crores of potential getting tapped. In this, I am not taking into account any new acquisitions and any new launches.
Okay, thanks. One more question is on the Sunteck City. Okay. In the year FY 2020, you sold around 156 units. All the units you sold are from Avenue 1, Avenue 2, or also in Avenue 5? What is the new product [inaudible]
Biplab, we have sold 123 units in Avenue 4.
Okay
30, 40 units we have sold in Avenue 1 and Avenue 2. The sales in the first quarter has been mostly from Avenue 1, the ready-to-move-in inventory.
Okay. Okay. Thanks. I'll come back in the queue.
Thank you. We'll move on to the next question that is on the line of V.P. Rajesh from Banyan Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity. I was just wondering, earlier you would give a slide which had estimated inventory value and estimated cost. Have you discontinued that or will you be publishing that separately?
Hi, this is Ronak here. If you've noticed, we have started updating a fact sheet on our website as well as we file it with the stock exchange. That will continue to be updated on a quarterly basis, which will contain all the information that you just mentioned. The change is being uploaded and disclosed regularly.
Okay. Just on the BKC, what is the number of unsold apartments as of Q1? What is the value which is there in the balance sheet in the inventories category, IG?
Sure. The total unsold units are close to 39 units.
Okay. What is the value of those 39 units then?
Total unsold inventory will be INR 1,800 crores.
Anything else? Hello?
Hello.
Yeah. Hello.
Did you get that?
Yeah.
I said the total unsold inventories are INR 1,800 crores.
Yes. Thank you, Ronak. I just got that. My follow-up question was that, given the way market is, what is the velocity you expect in BKC? Last year we sold only two on a net basis. Are you expecting this to pick up in this year or next year or the year after that? Just trying to get a sense on that.
Kamal here. So we're definitely obviously looking forward to sell as much as units, obviously every quarter- on- quarter and year- on- year. Always we have been able to sell 8-9 units every year. Unfortunately, the last two quarter has been bad quarters because obviously due to COVID-19. Otherwise, if you see the track record from last more than 4-5 years, we have been able to maintain the velocity of 8- 10 units on every year- on- year basis. And every quarter, at least maybe 2-3 units. Going forward, if we continue even that momentum, we are confident that at least I think we should be able to maintain that momentum.
Even in the current financial year, you think you can sell eight, nine units?
We've already lost one quarter and maybe very frankly, we don't know this COVID-19 will last how much time. If this goes continues for another nine months to one year, maybe, we might see lesser velocity in that. We are not very confident on the BKC product sales, to be very frank. Now as we hear from the market, even the demand has slowly started picking up in even the uber-luxury segment. We have seen quite a few sales happening in South Mumbai, which is in the uber-luxury segment, which is like ticket size upward of INR 30, 40 crores. I think that is slowly picking up and hopefully we should at least do, if not six, seven apartments, at least we'll try and what we are looking forward for at least 4-5 apartments in coming quarters.
Okay. That's helpful. My second question is, your debt has gone up year-over-year. Any thoughts around what it will look like by the end of this financial year?
Sorry, Rajesh. You were saying your debt has gone up. The way you said, I really felt that it has rocketed or something. I think it is marginally going up. Obviously, we are doing new acquisitions where we are putting too much money into the constructions. We want the construction speed to be fast. You are seeing the cash flows are very strong, so I don't think we need to worry with such a kind of debt equity ratio. If we don't have this much debt, then I think we can't get a good ROE or we will never be able to do good business. I think this is relatively, in fact, very cautious and conservative debt equity ratio. We like to maintain this kind of debt equity ratio. In fact, historically, if you see, Sunteck always has been near this ratio.
We continue to maintain, in spite of aggressive acquisitions mode, which we will get into what we are looking forward, what we are seeing in the market. We are not looking to increase our debt anyhow and stretch the balance sheet.
Right. No, Mr. Khetan, I was just pointing out that.
Rajesh, sir, we would request that you return to the question queue. There are participants waiting for their turn.
Sure.
Thank you. We'll move on to the next question that is on the line of Mr. Sameer Baisiwala from Morgan Stanley. Please go ahead.
Yeah, thank you and good evening, everyone. Sir, quick question on the Vasai acquisition, and congrats for that. Is the selling price assumption INR 10,000 and construction cost INR 2,500?
Hi Sameer. Kamal here. Sameer, the construction sales velocity what we have taken is starting from INR 7,500, INR 8,000 a square feet, in fact. The construction, obviously, what we are doing in Naigaon and today what we are getting, because we are doing in-house construction. Because of our in-house construction capability, I think today we are doing construction cost at Naigaon is close to INR 2,000, INR 2,200. Per year, this will be a slightly one notch higher product than the Naigaon, and a similar 23-story towers. We look at INR 2,500, INR 2,600 a square feet, and that's all.
Over a period of the lifespan of the project, we are looking to achieve INR 8,500-INR 9,000 a sq ft on a realization value, which is close to, if you look at 4.5 million sq ft, there will be some small in-house retail and other components, which will give us a higher realization. Some other product what we are looking to design, which I would not like to very frankly share on this call. On an average, we are pretty confident over the lifespan of the project, we will easily achieve anything closer to INR 10,000 a sq ft. We will start with close to INR 8,000 a sq ft.
Okay, great. That's very clear. Would this be attracting any tax benefit, or would this be at your marginal tax rate?
No. We are not taking into consideration any tax benefit on this. If we are talking about 25%, 30% margin, that is post-tax.
Okay, got it. Great. Sir, second question here is, given the current market conditions and your balance sheet strength, is it possible to do two, three, four such deals in a year rather than one every 1-2 years?
I will be very happy, Sameer. Why not do two or not two. Why two? I want to restrict myself to two or three. In fact, I would love to have four or five, but on a lighter note, sorry. Definitely we will look to do as much as possible. We want to be very selective because even if you take one wrong project, maybe you'll not make loss because of the asset light model, but your bandwidth loss can be enough that may eventually lose the potential to acquire a better and good project. We will be quite selective, but we will not stop it. In this year itself, if we get similar two or three more projects, we will not stop that because we will not be able to ramp up for that. We are ready for that.
This is a once in a lifetime opportunity, I think. Unfortunately, the opportunity has come due to wrong reasons. It is an opportunity as a business. I don't think we will leave it if we get any such similar opportunity once again.
Okay. Sir, are you also thinking of doing such deals within the municipal limits, or would these be outer suburbs?
We have been very clear, Sameer, that we want to maintain MMR region is our key strength, and this proved even in this worst COVID kind of a scenario. In spite of complete lockdown, Mumbai was in complete lockdown, and we could do such kind of sales. We are pretty confident that we want to maintain ourselves, restrict ourself in MMR region, and again, not lose out our bandwidth. Because if it being in MMR region, if we can do a product of INR 25 lakhs to INR 125 crore, why should I feel we should go out of MMR region? What is the reason? What is the compulsion? I think MMR market is the most resilient market. We have seen this during the Lehman crisis. Time and again, we have gone through so many crises, whether it is demonetization, GST, RERA, blah, so many things, NBFC crisis.
I think this is the most resilient market except the few micro markets where there is an oversupply, and you can see we have always stayed away from those kind of micro markets.
No, I meant within MMR, the municipal limits.
MMR, like Vasai is again in VVMC, that is a Vasai-Virar Municipal Corporation, which is not BMC. Naigaon is again in VVMC. It is not in BMC. It's a municipal limit, but not in municipal limit of Bombay.
Okay. That's fine. Yeah. Thank you, sir.
Thane does not come or Navi Mumbai, what we do, which is in NMMC, which is Navi Mumbai Municipal Corporation, and Thane, which is obviously TMC. These are obviously municipal limits, but outside Mumbai municipal limits.
Okay. Fair enough. Yeah. Thank you, sir.
Thank you, Sameer.
Thank you. The next question is on the line, Parvez Akhtar from Edelweiss. Please go ahead.
Hi. Good afternoon, sir, congrats with the good set of performance in Q1 amidst all the uncertainty which is there. A couple of questions from my side. Obviously, the near-term environment is pretty uncertain and challenging, what is the kind of launches that we can probably see in FY 2021 across all our projects?
Parvez, I would definitely not like to disclose right now on this call what are the launches, but you will very definitely see some launches coming up from Sunteck. We will not shy away because we are in, so, like we didn't close our sales pavilions or sales shop during the lockdown. Now, almost the lockdown is now slowly getting over, and we are looking forward to do two, three launches and activations as well.
Sure.
We are confident that good sales momentum we will see, especially in this quarter, July, August, September.
Sir, also because of the lockdown, obviously, there would have been some disruption to our construction timelines. For our under-construction projects, what are the kind of construction timelines that we are now looking?
We have internally calculated. I think because of the lockdown, where there was a complete lockdown, construction was not allowed. Obviously, that was close to two months or so, and obviously, those two months we obviously could not do any construction at all. No one was allowed to do any construction. Since we have in situ workers, most of the workers, we tried to retain them at the site, and we kept them well with the proper social distancing, providing them proper hygiene, and giving them food and everything. I think we could retain many of them from going back to their hometowns. That helped us to pick up our construction site faster, and I can tell you that we are almost, I will not say, but still we are slightly away from the pre-COVID time, but we are almost near pre-COVID time.
I think by the end of August, we will be again, in fact, almost to the pre-COVID level or, in fact, faster than that because we want to catch up for the loss of the time, whatever we have done during that COVID time. That's all.
Sure. Sir, last, just one data-specific question. What is the inventory that we still have in ODC one and two?
Parvez, Ronak here. The total unsold inventory in Avenue 1 and Avenue 2 will be close to about INR 575 crores roughly.
Sure. Thanks. That's it from my side and all the best.
Thank you. The next question is on the line of Sumit Kumar from Max Life Insurance. Please go ahead.
Hi, good evening, everyone. Thanks for taking my question. Congrats on the beat. My question is on the commercial projects, particularly the BKC project that you had and the one in ODC and Naigaon. What's the construction status and any update on using or divesting? The second question is a follow-up on the ODC commercial. It's been, I think, since FY 2018, since you had plans of starting it. What was the reason for the delay in approvals?
Hi, Sumit. Coming to commercial projects, first of all, when we are talking about commercial projects, we have in all 4-5 commercial projects. Let's talk about BKC, which is BKC Sunteck ICON, and then the second BKC is BKC 51, Sunteck BKC 51. Both those projects are under construction and at full swing. They are above the plane level, and we are looking forward to complete those projects in next 9- 10 months. Those are again being nearer to BKC. We don't see any problem in those and the construction. That's why we don't want to slow down. We want to maintain that same speed, and we are quite confident because being close to BKC, I think we'll be able to get away with that.
Coming to the ODC project. Fortunately, obviously, I would say once again, at the cost of repetition, we were lucky that we didn't get the approvals. Obviously, the approval could not come. We all know there are various approvals which are required in every project. There are N number of approvals starting from environment to the UNC to your high-rise approval, HRC, HR approval, N number of approvals. I can continue to go on. Definitely, there were two, three approvals which were challenging. I think we were fortunate. That's why right now if you see, we say that we may be best in doing the construction, designing architecture, putting the right product, right everything.
Maybe I think we are slightly less efficient in getting the approval, and we don't mind saying that, and I think that in this case, at least on a hindsight, this has been helpful to the company, and we have been lucky. I would put it that way. I think that's okay?
Sure. On the mixed-use projects in ODC and Naigaon, what's the status?
Naigaon, there is nothing called commercial. There is a retail which we are selling strata sales. Only 1 or 2 maybe strategically to get the better sales velocity, we will lease it out to a good brand, but otherwise the idea is to do a strata sale. Retail, if we do a retail mall or something, that will be only if the things get improved and that is only to complement the residential and the size will be only that size which can cater the community which is staying in Sunteck World. Not that we want to do a mall and get into a mall business out there. The idea is to complement and get a better pricing for residential in that micro market by giving a proper good infrastructure to that entire community. That's the idea of doing residential or retail out there.
Sorry, retail shops and the retail mall out there. ODC we have already set the commercial. Anything which I missed out?
No, that's it from my side. Thank you.
Okay, thank you.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the Chairman and Managing Director, Mr. Khetan for his closing comments.
Thank you all for taking out the time from your busy schedules today. In case if any of your queries have been left unanswered, you can get in touch with me or my team. We look forward to your continued support. Thank you once again for joining us today, and please be safe. Thank you.
Thank you. Ladies and gentlemen, on behalf of Sunteck Realty, that concludes this conference call. Thank you for joining us and you may now disconnect your lines. Thank you.